a

GAO

United States General Accounting Office

Report to the Honorable Michael Enzi, 

U.S. Senate

May 2003 UNITED NATIONS

Early Renovation 

Planning Reasonable, 

but Additional 

Management Controls 

and Oversight Will Be 

Needed

GAO-03-566
U.N. officials followed a reasonable process consistent with leading industry 

practices and recognized guidelines in developing the headquarters 

renovation plan—the first phase of a five-phase renovation process. As the 

project advances, changes in scope, schedule, and cost are to be expected. 

To finance the renovation, the Secretary-General anticipates a no-interest 

loan from the United States. However, U.S. and U.N. officials stated that 

neither the United States nor the United Nations have specified the nature of 

any financing commitment. GAO estimates that the financial impact of the 

renovation to the federal government, including providing a $1.2 billion nointerest loan and repaying a share as a U.N. member, would be over $700 

million, depending on the loan terms and conditions. 

Several critical milestones must be met for construction to begin as planned, 

including securing a financing commitment and signing a lease for a building 

where U.N. staff and delegates would relocate during the renovation (see 

diagram below). As the renovation project progresses, additional 

management, oversight, and monitoring is needed. The United Nations plans 

to complete a project management plan, which would help the United 

Nations control cost and schedule. While the United Nations has approved 

initial funding for the Board of Auditors to conduct oversight of the 

renovation and the board is preparing its audit strategy, the Office of Internal 

Oversight Services does not have the resources or audit strategies needed to 

effectively conduct oversight of the renovation. The Department of State has 

assembled a task force to monitor the renovation, but the department will 

need to define the task force’s mission and program goals. Doing so would 

allow the department to develop strategies for employing the appropriate 

skill mix needed to achieve a successful outcome for the task force. 

Key Milestones for the U.N. Renovation 

a

United Nations Development Corporation. 

The United Nations estimates that 

its planned renovation of the seven 

buildings on the Headquarters 

complex could cost almost $1.2 

billion. As the host country and the 

largest contributor to the United 

Nations, the United States has a 

significant interest in this project. 

This report (1) assesses the 

reasonableness of the U.N. process 

to develop the renovation plans, (2) 

analyzes the potential cost to the 

United States, (3) identifies critical 

milestones before construction can 

begin, and (4) discusses efforts to 

monitor and oversee the project. 

GAO is recommending that the 

Secretary of State encourage the 

United Nations to (1) complete and 

implement an effective project 

management plan and (2) provide 

its oversight offices with sufficient 

resources to conduct oversight 

throughout the renovation. GAO is 

also recommending that the 

Secretary of State define the 

mission and program goals of the 

task force currently monitoring the 

project and ensure that it has the 

necessary resources for the 

duration of the project. 

The United Nations and 

Department of State agreed with 

our findings and recommendations. 

The Board of Auditors provided 

updated information on its budget 

and disagreed with our 

recommendation calling for the 

United Nations to provide it with 

resources to conduct oversight of 

the renovation 

www.gao.gov/cgi-bin/getrpt?GAO-03-566.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Joseph A. 

Christoff at 202-512-8979 or 

christoffj@gao.gov. 

Highlights of GAO-03-566, a report to 

Honorable Michael Enzi, U.S. Senate 

May 2003

UNITED NATIONS

Early Renovation Planning Reasonable, 

but Additional Management Controls and 

Oversight Will Be Needed 
Page i GAO-03-566 U.N. Renovation

Contents

Letter 1

Results in Brief 2

Background 5

Planning Process Is Reasonable but Still in an Early Phase 8

Estimated Financial Impact of the Renovation to the United 

States 14

Key Milestones in the Renovation Process 16

Effective Project Management and Oversight Needed for the 

Renovation to Be Successful 21

Conclusions 25

Recommendations for Executive Action 26

Agency Comments and Our Evaluation 26

Appendixes

Appendix I: Scope and Methodology 28

Appendix II: Two Approaches to Renovating the U.N. Headquarters 

Complex 30

U.N. Secretary-General Offered Two Renovation Approaches 30

Appendix III: U.N. Consultants and Subconsultants 34

Appendix IV: Security Upgrades at the United Nations 35

Completed and Planned Security Initiatives 35

Appendix V: Comments from the United Nations 37

Appendix VI: Comments from the Department of State 38

Appendix VII: Comments from the Office of Internal Oversight Services 40

Appendix VIII: Comments from the U.N. Board of Auditors 42

GAO Comments 44

Appendix IX: GAO Contacts and Staff Acknowledgments 45

GAO Contacts 45

Staff Acknowledgments 45

Tables Table 1: Estimated Financial Impact to the Federal Government of 

Financing $1.2 Billion U.N. Renovation under Various Loan 

Terms 15

Table 2: Preliminary Cost Estimate of Approach 1 31

Table 3: Preliminary Cost Estimate of Approach 2 32

Table 4: Firms Involved in the Conceptual Planning Process 34
Contents

Page ii GAO-03-566 U.N. Renovation

Figures Figure 1: U.N. Headquarters Complex 5

Figure 2: U.N. Headquarters Complex and Proposed Location of 

Swing Space under Approach 1 7

Figure 3: Five Phases of a Renovation Project 13

Figure 4: Sequence and Estimated Time Frames for U.N. 

Headquarters Renovation 18

Figure 5: Proposed Swing Space Site 20

Figure 6: U.N. Headquarters Complex and Proposed Location of 

Swing Space under Approach 1 30

Figure 7: United Nations Security Initiatives 35

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Page 1 GAO-03-566 U.N. Renovation

United States General Accounting Office

Washington, D.C. 20548

A

May 30, 2003 Lret

The Honorable Michael Enzi

United States Senate

Dear Senator Enzi:

The United Nations (U.N.) Headquarters complex in New York City no 

longer meets current safety standards and needs major renovation, which 

U.N. officials estimate could cost almost $1.2 billion. Because the United 

States is host country to the United Nations, the U.N. Secretary-General 

anticipates that the United States will provide a no-interest loan for the 

renovation, similar to the one the United States provided when the U.N. 

complex was built between 1949 and 1952. The U.N. General Assembly has 

not yet given its final approval for the renovation project but has authorized 

its continued design. In June 2001, we reported that the U.N. early planning 

process had been reasonable.1

 Since that report, the United Nations has 

further developed its plan, recommending an approach that would 

renovate the entire complex; lease a new office building, or “swing space,” 

built adjacent to the complex; and temporarily move most U.N. staff to that 

building. 

You asked us to update our prior report by assessing the revised U.N. 

renovation plan. In this report, we (1) assess the reasonableness of the U.N. 

process to develop the renovation plan, including the cost estimate and 

physical security components; (2) estimate the potential financial impact to 

the federal government of the renovation; (3) identify critical milestones 

before construction can begin; and (4) discuss U.N. and Department of 

State efforts to manage, oversee, and monitor the project as it proceeds.

To undertake our work, we reviewed the 2002 Capital Master Plan and 

related reports prepared by the U.N. architect-engineering firm, cost 

estimating subconsultant, and security subconsultant. We also reviewed 

construction and security industry literature and U.N. and U.N. 

Development Corporation2

 project plans. To estimate the financial impact 

1

U.S. General Accounting Office, United Nations: Planning for Headquarters Renovation 

Is Reasonable; United States Needs to Decide Whether to Support Work, GAO-01-788

(Washington, D.C.: June 15, 2001).

2

The U.N. Development Corporation is a New York State nonprofit public benefit 

corporation tasked with constructing and leasing office space to the United Nations.
Page 2 GAO-03-566 U.N. Renovation

of a no-interest loan, we analyzed the impact of the United States foregoing 

future interest payments and assuming the risk of a potential U.N. default 

on the loan. We discussed the Capital Master Plan with U.N. officials, the 

consultants who developed the designs, industry experts, and Department 

of State officials (see app. I for more information on our scope and 

methodology).

Results in Brief U.N. officials followed a reasonable process consistent with leading 

practices and recognized guidelines to develop the 2002 Capital Master 

Plan. Thus far, the United Nations has completed the first phase—

conceptual planning—of a five-phase renovation process. To develop the 

conceptual plan, U.N. officials and the architect-engineering firm followed 

leading facility acquisition practices, including obtaining detailed 

assessments of the complex’s condition and involving U.N. managers in the 

planning. To develop the $1.2 billion preliminary cost estimate, U.N. 

officials and the cost estimating subconsultant followed the Construction 

Industry Institute’s best practices, including ensuring that the estimate 

included appropriate cost elements and hiring a firm to peer review the 

estimate. U.N. officials and their security subconsultant also followed 

recognized guidelines in developing the plan’s security upgrades, including 

identifying threats to U.N. assets and prioritizing U.N. security needs. 

Although the United Nations has followed a reasonable process thus far, it 

is still early in the planning process and changes to the conceptual plan and 

cost estimate are to be expected. For example, Construction Industry 

Institute research indicates that the final cost of any project at this early 

stage may vary from plus or minus 30 to 50 percent of the preliminary 

estimate.

Should the United States agree to finance the renovation, we estimate the 

financial impact to the federal government for the renovation would be 

over $700 million.3

 We estimate that the potential financial impact to the 

federal government as a lender would be $591 million on a no-interest loan 

3

We express all figures on the potential financial impact to the federal government in 2003 

present value dollars. 
Page 3 GAO-03-566 U.N. Renovation

of almost $1.2 billion4—mostly in foregone interest.5 The Secretary-General 

anticipates that the United States will provide a no-interest loan to finance 

the renovation. However, the United States has not yet made a decision 

whether to provide the United Nations a no-interest loan. In addition, we 

estimate that the United States, as a member of the United Nations, would 

repay $126 million of the loan principal. Another potential financial impact 

to the federal government is the loss of federal tax revenue on bonds to 

finance the proposed swing space building. The U.N. Development 

Corporation is seeking congressional approval for a federal tax exemption 

on the bonds it plans to issue to finance the construction. If this exemption 

is granted, the federal government would not realize tax receipts over a 30-

year period of as much as $108 million in 2003 present value dollars.

Several critical milestones have to be met in 2003 for the planning process 

to continue and construction to begin in 2005. First, and most importantly, 

the United Nations is seeking a financing commitment for the renovation 

by October 2003. However, neither the United States nor the United 

Nations have specified the nature of a financing commitment, according to 

U.S. and U.N. officials. If an acceptable commitment is secured, the 

General Assembly must then vote whether to proceed with the renovation, 

and the United Nations can sign a lease with the U.N. Development 

Corporation for the proposed swing space. Without a lease agreement, the 

corporation will not construct the swing space that the United Nations 

would occupy during the renovation. Second, to begin construction on the 

proposed swing space in 2004, the corporation must obtain New York state 

and city approval to acquire the site for the proposed swing space and also 

receive a tax exemption for borrowing. According to U.N. officials, without 

a tax exemption, the annual lease cost to the United Nations could increase 

substantially and could thereby make the lease economically unfeasible.

As the U.N. project progresses through the design phase, project 

management, oversight, and monitoring mechanisms will be essential to 

ensure cost and schedule control and accountability. In January 2002, the 

United Nations hired a project management consultant to help develop a 

broad framework for a project management plan. The United Nations does 

4

We estimate that this loan would equal approximately $1.07 billion in 2003 present value 

dollars.

5

The cost of a no-interest loan would depend on its terms and conditions, such as the length 

of time the United Nations would have to repay the loan. For our analysis, we assumed the 

United Nations would repay the loan over 25 years.
Page 4 GAO-03-566 U.N. Renovation

not currently have sufficient staff to complete the project management plan 

and effectively manage the project throughout the next phases, but it plans 

to hire approximately 40 staff and/or contractors in addition to the 12 

currently managing the project. The U.N. Board of Auditors and Office of 

Internal Oversight Services are expected to oversee the renovation project. 

While the United Nations has approved initial funding for the Board of 

Auditors to conduct oversight of the renovation, the Office of Internal 

Oversight Services does not have a dedicated budget or personnel with the 

expertise in construction or capital projects to effectively oversee a large 

construction project, according to U.N. officials. The Department of State 

also plans to monitor the renovation process and coordinate the U.S. 

response to the financing request. Since our last report, the department has 

assigned staff on a part-time basis and a point-person at the U.S. Mission to 

the United Nations to a task force that monitors the Capital Master Plan. In 

addition, the department has tasked a senior official at the mission to 

represent U.S. concerns on the renovation to the United Nations and other 

member state representatives. However, the department has not formally 

determined the task force’s mission or program goals or defined its 

resources needs, including expertise. 

In this report, we are recommending that the Secretary of State, in 

consultation with the appropriate U.S. administration officials and other 

U.N. member states, encourage the United Nations to complete and then 

implement an effective project management plan and provide their internal 

and external oversight offices with the resources needed to conduct 

effective oversight throughout the renovation. In addition, we are 

recommending that the Secretary of State formally define the mission and 

program goals of its task force, determine the expertise needed, and 

provide the resources necessary to support these efforts. 

In commenting on a draft of this report, the United Nations and the 

Department of State agreed with our conclusions and recommendations. 

The Board of Auditors did not agree with our recommendation that the 

United Nations provide it with the resources needed to conduct effective 

oversight of the renovation project. A board official stated that the United 

Nations recently provided the board with $35,000 for this purpose. We 

modified our recommendation to acknowledge the board’s initial funding, 

but continue to recommend funding for the board’s oversight function over 

the course of the six-year renovation project.
Page 5 GAO-03-566 U.N. Renovation

Background The original U.N. Headquarters complex, located in New York City, was 

considered among the most modern facilities when it was constructed 

between 1949 and 1952. The United States financed construction of the 

original complex—the General Assembly, Secretariat, and Conference 

Building—by providing the United Nations with a no-interest loan 

equivalent to about $420 million in 2003 dollars. The rest of the complex—

the Dag Hammarskjöld Library, the underground North Lawn Extension, 

South Annex, and Unitar Building—was built between 1960 and 1982 and 

was funded through the U.N. regular budget or private donations (see fig. 

1). Currently, the complex accommodates the needs of 191 U.N. member 

countries and approximately 4,700 U.N. staff. However, the U.N. buildings 

do not conform to current safety, fire, and building codes and do not meet 

U.N. technology or security requirements. The United Nations estimates it 

would cost more than $2 billion over 25 years for repairs and system 

replacements in the absence of a major renovation.

Figure 1: U.N. Headquarters Complex

In June 2001, we reported that the Secretary-General’s first Capital Master 

Plan had defined the need for renovation, established the SecretaryGeneral’s expectations for the project, and provided options for a multiyear 

Sources: United Nations and GAO.

North Lawn

Extension

Unitar

Building

Core complex

Subsequent buildings

Conference

Building

General

Assembly

Secretariat

First Avenue

FDR Drive

East River

FDR Drive

North

South

AnnexLibrary

42nd Street

48th Street

SITE PLAN

UNITED NATIONS HEADQUARTERS

LONG TERM CAPITAL MASTER PLAN

Buildings and Grounds Included in Renovation
Page 6 GAO-03-566 U.N. Renovation

effort to renovate the headquarters.6 The General Assembly reviewed the 

plan and approved $8 million to further develop the conceptual designs and 

associated cost estimates for the renovation. The General Assembly agreed 

with the Secretary-General’s assumptions, which provided the framework 

for the renovation planning. These assumptions included the following:

• The headquarters complex would remain at its current location in New 

York.

• The complex should be energy efficient, free of hazardous materials, 

and compliant with host city building, fire, and safety codes. 

• The complex should meet all reasonable security requirements.

• Disruption to the work of the United Nations should be kept to a 

minimum. 

In August 2002, the Secretary-General presented the General Assembly 

with a more detailed Capital Master Plan and endorsed a renovation 

approach that included the temporary relocation of most U.N. staff and 

delegates to “swing space” in a proposed new building (see fig. 2 for the 

swing space location and app. II for more information on the renovation 

approach).7

6

GAO-01-788 and United Nations, Capital Master Plan: Report of the Secretary-General, 

A/55/117 (New York, N.Y.: United Nations, June 28, 2000). 

7

United Nations, Capital Master Plan: Report of the Secretary-General, A/57/285 (New York, 

N.Y.: United Nations, Aug. 8, 2002).
Page 7 GAO-03-566 U.N. Renovation

Figure 2: U.N. Headquarters Complex and Proposed Location of Swing Space under 

Approach 1 

In December 2002, the General Assembly adopted a resolution endorsing 

the renovation approach and approved $25.5 million for detailed designs 

and cost estimates to be developed in 2003. The General Assembly also 

approved $26 million to complete the design process in 2004–2005.8

 The 

General Assembly does not plan to make a final decision on whether to 

proceed with the renovation until financing is secured.

8

United Nations General Assembly, Resolution Adopted by the General Assembly, 

A/RES/57/292 (New York, N.Y.: United Nations, Feb. 13, 2003).

Source: United Nations.

Proposed location 

of swing space
Page 8 GAO-03-566 U.N. Renovation

Planning Process Is 

Reasonable but Still in 

an Early Phase

In developing the renovation conceptual plan and cost estimate, U.N. 

officials, their architect-engineering firm, and subconsultants followed a 

reasonable planning process that was consistent with leading practices. In 

addition, U.N. officials and their security subconsultant followed a process 

consistent with recognized guidelines to develop plans for improving 

security at the U.N. complex. The United Nations is still in the early 

planning stages of the project—the first phase of a five-phase process. For 

this reason, changes to the scope and cost of the proposed renovation are 

to be expected. 

Process Used in Early 

Planning Phase Followed 

Leading Practices

The overall U.N. process to develop a conceptual plan followed leading 

facility acquisition practices.9

 

• Competitively procured an architect-engineering firm. U.N. 

renovation officials used a competitive process to procure the services 

of an architect-engineering firm (see app. III for the names of the firms 

involved). The United Nations received 15 responses to its request for 

proposals from firms representing six different countries. In 2001, the 

United Nations selected and hired an architect-engineering firm to 

prepare a comprehensive renovation design concept and cost analysis. 

The architect-engineering firm used subconsultants with recognized 

expertise in construction disciplines such as cost estimation, security, 

and structural engineering.

• Obtained assessments of the complex’s condition. The architectengineering firm and subconsultants reviewed condition assessments 

conducted in 1998 and performed additional inspections and 

assessments of the complex’s condition as needed. For example, they 

completed a new assessment of the Secretariat Building’s deteriorating 

window structure. U.N. officials subsequently concluded that it was 

more cost effective to replace the window structure than to renovate it, 

as had been previously planned.

9

Ralph S. Spillinger, in conjunction with the Federal Facilities Council’s Standing Committee 

on Organizational Performance and Metrics, Adding Value to the Facility Acquisition 

Process: Best Practices for Reviewing Facility Designs, Federal Facilities Council 

Technical Report #139 (Washington, D.C.: National Academy Press, n.d.).
Page 9 GAO-03-566 U.N. Renovation

• Retained firm to review the renovation conceptual plan. U.N. officials 

retained the services of a consulting engineer to assist them in reviewing 

the conceptual planning reports and recommendations.

• Involved U.N. managers in the planning. U.N. officials involved facility 

managers, such as those responsible for building and program 

management, security, and information technology, in the planning 

process to ensure that the renovation would meet their needs. The 

managers were asked to verify the conditions and problems identified 

by the architect-engineering firm and subconsultants and comment on 

whether the proposals would address their needs.

Process to Develop 

Preliminary Cost Estimate 

Followed Best Practices

To develop a preliminary cost estimate, U.N. officials and the cost 

estimating subconsultant followed industry best practices established by 

the Construction Industry Institute.10

• Defined the scope of the project and work plan, including 

responsibilities, schedule, and project budget. U.N. officials identified 

the building improvements that were to be included in the project scope: 

replacing heating, air conditioning, and electrical systems; refurbishing 

the window structure on the Secretariat Building; enhancing security 

measures; and modernizing communication and technology capabilities. 

The U.N. contract with the architect-engineering firm established the 

schedule for the cost estimating subconsultant to submit three cost 

estimates for approval. To compare the renovation approach budgets, 

U.N. officials also instructed the cost estimating subconsultant to 

develop one renovation approach within the budget parameters of the 

2000 Capital Master Plan.

• Standardized the cost estimate format. U.N. officials used a 

standardized cost estimate format, including elements such as 

professional fees, labor and material costs, design and construction 

contingencies, and escalation costs to account for inflation. The 

standardized format enables U.N. officials to compare current and 

future cost estimates as the project progresses through the design 

process.

10The Construction Industry Institute is a research organization composed of construction 

contractors and owners that seeks to improve the construction and capital investment 

process.
Page 10 GAO-03-566 U.N. Renovation

• Reviewed and checked cost estimate. U.N. officials reviewed the cost 

estimate to ensure that the conceptual planning estimates were within 

acceptable cost parameters. For the final review, U.N. officials hired a 

cost estimating consultant to peer review the cost estimate. While the 

peer reviewer’s assumptions were more conservative than the 

subconsultant’s assumptions, the peer reviewer’s cost estimate was 

within 5 percent of the subconsultant’s cost estimate. Based on the peer 

review, U.N. officials adjusted the cost estimate.

• Documented and reported the final cost estimate and range of 

accuracy. The cost estimating subconsultant delivered the final cost 

estimate, including contingencies that are meant to reflect the accuracy 

of the estimate, to U.N. renovation officials for the 2002 Capital Master 

Plan in August 2002. Consistent with industry practices, the 

subconsultant added a design contingency to allow for changes that 

typically occur during the design process. The subconsultant also added 

a construction contingency to allow for unforeseen or unknown costs. 

For example, structural conditions hidden by current construction may 

conflict with planned renovations and require contract changes.

Process to Develop 

Preliminary Plans for 

Security Upgrades Followed 

Recognized Guidelines

After the terrorist attacks of September 11, 2001, the United Nations 

enhanced security at the U.N. complex and added security measures to the 

Capital Master Plan (see app. IV for further information). U.N. officials and 

the U.N. security subconsultant identified the additional security measures 

through a process consistent with recognized security risk management 

guidelines. We have previously reported on these guidelines, which 

members of the U.S. intelligence and defense community follow and can 

provide a sound foundation for effective security.11

• Identified the assets to be protected and the impact of their potential 

loss. The security subconsultant identified assets at the United Nations 

to be protected, such as the buildings and the perimeter. The United 

Nations also evaluated the importance of each asset, the potential 

impact of its loss, and the methods to maintain operations if the assets 

were lost or damaged.

11U.S. General Accounting Office, National Preparedness: Technologies to Secure Federal 

Buildings, GAO-02-687T (Washington, D.C.: Apr. 25, 2002).
Page 11 GAO-03-566 U.N. Renovation

• Identified threats to those assets. U.N. security officials consulted with 

relevant federal and local U.S. officials to assess changing threats to the 

United Nations. According to U.N. officials and the security 

subconsultant, they designed the security initiative in the Capital Master 

Plan to address these threat levels.

• Identified vulnerabilities. The security subconsultant reviewed five 

previous vulnerability assessments and conducted their own 

assessment of the entire complex to verify vulnerabilities and identify 

needed security upgrades.

• Assessed risks (potential for loss or damage) and determined 

priorities. Following security guidelines from the U.S. Interagency 

Security Committee,12 the security subconsultant developed a risk 

assessment that reflected its analysis of the threats to the U.N. complex 

and its vulnerabilities. Based on the risk assessment, U.N. officials then 

prioritized the security needs of the complex. According to an expert 

from the Interagency Security Committee, the risk assessment process 

used to develop the planned security upgrades was reasonable based on 

the consultant’s report to the United Nations.

• Identified countermeasures that mitigate risks. The security 

subconsultant used the risk assessment to identify and recommend 

more than 100 security measures for the Capital Master Plan. U.N. 

officials organized these security upgrades into two components—those 

in the baseline scope of the Capital Master Plan and those in a package 

of options. 

The security risk management guidelines are not a rigid set of procedures, 

but rather recognized steps to ensure that critical issues are considered 

when designing a security program. Additionally, U.N. security officials 

sought peer review input from other U.N. departments and public and 

private sector security experts when designing the security program. 

According to security officials from the Departments of State, Defense, and 

Energy and the General Services Administration, the U.N. process for 

developing the security initiatives in the Capital Master Plan was 

reasonable. 

12The U.S. Interagency Security Committee was created in 1995 under Executive Order 

12977 to establish building security standards among federal facilities. The committee 

consists of a chair—the Secretary of Homeland Security—and 17 other federal agencies. 
Page 12 GAO-03-566 U.N. Renovation

Renovation Planning Is in 

the Early Phases and 

Changes Are to Be Expected

U.N. officials have completed only the first phase of the renovation process 

by developing a conceptual plan for the proposed renovation. While U.N. 

planning efforts for the renovation have been reasonable so far, many 

decisions that can affect the project scope, schedule, and cost have yet to 

be made. For example, the General Assembly must decide whether it wants 

to include certain options that were proposed in the 2002 Capital Master 

Plan, such as installing extra back-up generators beyond those required by 

current building codes. Events outside U.N. officials’ influence, such as the 

availability of construction materials and labor, may also change the scope, 

schedule, and cost. In addition, the preliminary cost estimate is likely to 

change as the design phase progresses and decisions affecting the project’s 

scope are made. Construction Industry Institute research suggests that the 

final cost of a project may vary by plus or minus 30 to 50 percent of the 

estimated cost at this early phase of a project.13

While the United Nations has completed the conceptual planning phase, 

there are four remaining phases that renovation projects undergo, based on 

typical best practices in the design and construction industry (see fig. 3). 

13This range applies to the estimated cost without design and construction contingencies. 
Page 13 GAO-03-566 U.N. Renovation

Figure 3: Five Phases of a Renovation Project

• Conceptual Planning—Various feasibility studies are typically 

conducted to define the scope of work based on owner expectations for 

performance, quality, cost, and schedule. The need for temporary space 

and the options for meeting this need are identified. Several alternative 

design solutions are identified, and one approach is selected.

• Design—The design matures into final construction documents 

comprising the drawings and specifications from which bids can be 

solicited. Estimated cost and schedule issues receive increasingly 

intense oversight as this phase proceeds. The project scope defined at 

this phase will greatly determine the cost of the project. In addition, the 

cost of scope changes made after the design phase are higher.

• Procurement—This phase refers to owner procurement of long leadtime equipment, such as unique or large electrical or mechanical 

equipment. Delays in the delivery of this equipment could affect the 

phasing and sequence of construction work and potentially cause 

delays.

Design

Procurement

Construction

Start-up

Conceptual

planning

U.N. renovation

Sources: Federal Facilities Council Technical Report #139 and GAO.
Page 14 GAO-03-566 U.N. Renovation

• Construction—To execute the design, the services of a competitively 

procured construction contractor and specialty contractors and 

consultants are employed. The biggest challenge is the management of 

changes from the owner, design problems, or unknown conditions on 

the site. Construction is considered complete when the owner accepts 

occupancy of the building; however, work may continue for some time 

to identify and correct deficiencies in the construction work.

• Start-up—Start-up begins with occupancy of the building and entails the 

testing of individual and systems components to measure and compare 

their performance against the original design criteria.

Estimated Financial 

Impact of the 

Renovation to the 

United States 

The Secretary-General has indicated that the United Nations anticipates 

that the United States would provide a no-interest loan to finance the U.N. 

renovation. Should the United States agree to finance the renovation in this 

manner, we estimate that the financial impact of the renovation to the 

federal government would be over $700 million.14 This amount would vary 

depending on the terms and conditions of the financing arrangement. In 

addition, we estimate that over a 30-year period, the federal government 

would not realize tax receipts of as much as $108 million (2003 present 

value dollars) on the federally tax-exempt bonds that would finance 

construction of the proposed swing space. The U.N. Development 

Corporation is seeking federal tax exempt status for the bonds it plans to 

issue to finance the swing space building.

Financial Impact of the 

Renovation to the Federal 

Government Is over $700 

Million

We estimate the potential financial impact to the federal government as 

both lender to United Nations and member state would be over $700 

million for a $1.2 billion no-interest loan. As a lender of a subsidized loan to 

the United Nations, the federal government would forego future interest 

payments and assume the risk of a potential U.N. default on the loan. The 

estimated financial impact to the federal government of a no-interest loan 

for $1,193 million (repayable over 25 years) would be about $563 million for 

the interest subsidy to cover foregone interest payments and $28 million for 

the default subsidy that covers the risk of a potential U.N. default (see table 

14We did not estimate the financial impact to the United States if the United Nations sought 

other financing for the renovation or did not undertake the renovation.
Page 15 GAO-03-566 U.N. Renovation

1).15 If the United States provided a subsidized loan with interest rates of 1 

percent or 2 percent, the federal government would provide an interest 

subsidy of $443 million and $322 million, respectively. If the United States 

agrees to finance the renovation, Congress would be asked to appropriate 

the interest and default subsidies before the loan is made, as provided for 

under U.S. credit reform law.16 As a member of the United Nations, the 

United States may also be assessed an additional amount to repay the loan 

principal. We estimate that the net present value of the U.S. assessment for 

the principal repayments made over a 25-year period would be $126 

million.17 These repayments would need to be appropriated yearly. 

Table 1: Estimated Financial Impact to the Federal Government of Financing $1.2 

Billion U.N. Renovation under Various Loan Terms

Source: GAO analysis of U.N. data.

Note: Figures estimated using the Office of Management and Budget Credit Subsidy Calculator and 

interest rate assumptions from the FY2004 President’s Budget. Figures do not add due to rounding.

a

We excluded any administrative costs, fees, or recoveries. 

In estimating the financial impact to the federal government, we made 

several assumptions. We assumed that the federal government would 

disburse funds to the United Nations as a line of credit rather than a lumpsum payment. The federal government would disburse the funds each year 

15We excluded any administrative costs, fees, or recoveries.

16Federal Credit Reform Act of 1990 (codified at 2 U.S.C. 661). If the United States provides a 

loan to the United Nations, the Office of Management and Budget and the Congressional 

Budget Office would calculate the interest and default subsidies that would need to be 

appropriated based on the actual terms of the loan document.

17We estimate that the yearly nominal assessment for the principal repayments would be 

$10.5 million.

(In millions of 2003 present value dollars)

No-interest

1 percent

interest

2 percent

interest

Interest subsidy $563 $443 $322

Default subsidy 28 31 34

U.S. portion of principal repayment 126 126 126

Financial impact to federal governmenta $718 $600 $482

Impact as a percentage of renovation cost 60% 50% 40%
Page 16 GAO-03-566 U.N. Renovation

over a 5-year construction period. To model the size of the disbursements, 

we used the latest U.N. estimates of the funds it would need each year to 

pay its contractors during the renovation. We assumed that the United 

Nations would repay the loan over the subsequent 25 years in equal 

semiannual payments based on an additional assessment of member states. 

Since the United States is assessed 22 percent of U.N. operating costs, we 

assumed the federal government would repay 22 percent of the loan 

principal. However, because the United States does not currently allow its 

U.N. assessments to go toward interest payments on U.N. external 

borrowing, we assumed that the federal government would not repay any 

of the interest on a 1 percent or 2 percent loan.18 Finally, we used the U.N. 

preliminary cost estimate of $1,193 million from the 2002 Capital Master 

Plan for the renovation, which includes scope options that the United 

Nations has yet to decide on. 

Loss of Federal Revenue 

from Swing Space Bonds

The federal government would also not realize tax receipts if the U.N. 

Development Corporation is granted tax exempt status for its construction 

bonds. We estimate that the unrealized tax receipts over 30 years could be 

as high as $108 million in 2003 present value dollars. This estimate assumes 

that the U.N. Development Corporation would issue bonds for $350 

million—the estimated construction cost for the swing space. We also 

assumed that without the tax exemption, the bonds would earn 6.4 percent 

interest and the average marginal tax rate would be 31 percent.

According to corporation officials, the corporation would pay a higher 

interest rate on the bonds if it could not secure a tax exemption. The higher 

interest rate would raise the cost of financing the construction, which the 

corporation would then pass on to the United Nations in higher lease costs. 

Corporation officials stated that the United Nations could not afford the 

lease under its current operating budget without the tax exemption.

Key Milestones in the 

Renovation Process

To continue the planning process, key efforts must be pursued and critical 

milestones met. Given the General Assembly’s decision in December 2002 

to proceed with design, the United Nations is seeking a financing 

commitment from the United States for the renovation. Neither the United 

18This is an annual appropriation restriction that may not be made applicable in this 

situation.
Page 17 GAO-03-566 U.N. Renovation

States nor the United Nations have specified the nature of a financing 

commitment, according to U.S. and U.N. officials. Once an acceptable 

commitment is secured, the General Assembly will decide whether to 

proceed with the renovation, and the United Nations will be able to sign a 

lease with the U.N. Development Corporation. The corporation is also 

working to resolve a number of issues before it can begin construction on 

the swing space building in 2004.

United Nations Is Seeking a 

Financing Commitment

Figure 4 shows that securing a financing commitment is the next milestone 

in the renovation process. The Secretary-General anticipates that the 

United States will offer a no-interest loan to finance the renovation. For the 

United Nations to remain on its current renovation schedule, the United 

States would have to make a commitment to finance the renovation by 

October 2003. However, U.S. and U.N. officials stated that neither the 

United States nor the United Nations have specified the nature of a 

financing commitment. According to U.N. officials, the General Assembly 

will not make a decision to move forward with the renovation or sign a 

lease for the proposed swing space building without a financing 

commitment. According to U.N. Development Corporation officials, they 

will not begin construction on the proposed swing space building until the 

United Nations signs a lease. The corporation needs a signed lease before it 

can issue bonds to finance the construction of the swing space building. 

For the renovation project to stay on schedule, the proposed swing space 

building would have to be available for occupancy in early 2006. 
Page 18 GAO-03-566 U.N. Renovation

Figure 4: Sequence and Estimated Time Frames for U.N. Headquarters Renovation 

a

United Nations Development Corporation.
Page 19 GAO-03-566 U.N. Renovation

The U.N. Development 

Corporation Must Address 

Several Issues to Begin 

Swing Space Construction

The U.N. Development Corporation must resolve two key issues in 2003 for 

the swing space to be available to the United Nations in 2006. First, the U.N. 

Development Corporation is seeking to obtain state and city approval to 

secure ownership of the proposed swing space site by the end of 2003 (see 

fig. 5). According to corporation officials, New York state approval is 

necessary because the site is currently part of a city park and lies outside of 

the corporation’s development zone. Corporation officials also said they 

are currently working to obtain support within the local community, which 

has expressed concerns about the loss of the park space. To compensate 

the community, the corporation proposes to build a bike path along the 

East River and the U.N. complex. However, according to corporation 

officials, as of April 2003, no agreement had been reached. Once the issues 

with the community group are resolved, the corporation must seek New 

York state legislation by June 2003 to add the proposed construction site to 

its development district, according to corporation officials. The 
Page 20 GAO-03-566 U.N. Renovation

corporation will then seek New York City approval of its plans for the site. 

City officials have expressed support for the swing space construction.

Figure 5: Proposed Swing Space Site

Second, the corporation is seeking a federal tax exemption for the bonds it 

would issue to finance the swing space construction in early 2004. 

According to corporation officials, without a tax exemption, the annual 

lease cost to the United Nations could increase substantially, thereby 

making the project economically unfeasible. Under the 1986 Tax Reform 

Act, the U.N. Development Corporation and similar organizations lost the 

ability to issue bonds that are exempt from federal taxes. Corporation 

officials stated that they are working with members of Congress to 

introduce legislation that would restore a tax exemption for the swing 

space construction.

Source: GAO.
Page 21 GAO-03-566 U.N. Renovation

Effective Project 

Management and 

Oversight Needed for 

the Renovation to Be 

Successful

As the project moves into the critical design phase, the United Nations has 

begun the process to hire a consultant who will manage and oversee the 

final design and eventual renovation of the U.N. complex. These initial 

efforts are important as they lay the foundation for the project management 

plan to ensure that the project’s scope, schedule, and costs are effectively 

controlled. In addition, U.N. oversight bodies anticipate additional 

resources and are developing audit plans to conduct oversight of the 

renovation project. The Department of State and the U.S. Mission to the 

United Nations have also initiated efforts to monitor the project. The 

United States has a substantial interest in monitoring the project, 

particularly if the United States agrees to finance it. 

Effective Project 

Management Needed to 

Control Cost and Schedule

A well-defined project management plan and adequate project management 

staff will be essential for the United Nations to successfully complete the 

renovation on time and within budget. U.N. officials recognize the need and 

importance of a project management plan and adequate staff to implement 

the plan. In January 2002, the United Nations hired a project management 

consultant to help develop a broad framework for a project management 

plan. The consultant noted that once the United Nations establishes a 

project management team, it will need to develop its project management 

plan with detailed procedures. The consultant provided best practices 

recommendations for creating a project management plan to control costs 

and effectively implement the renovation. As of January 2003, the United 

Nations had started the process to hire a consultant to provide project 

management services, including developing the project management plan 

and then supporting the United Nations in managing the project through 

the design phase. 

Based on the U.N. project management consultant’s report and 

Construction Industry Institute research,19 an effective project 

management plan will help the United Nations control costs and schedule. 

An effective project management plan includes three key elements. First, a 

clearly defined scope of work that remains relatively stable will provide the 

basis for project decisions. The scope should clearly define the project 

content and parameters, schedules, milestones for execution, budgets, and 

expected project outcomes. Second, policies and procedures that 

19Construction Industry Institute, Project Change Management, Special Publication 43-l 

(Austin, Tex.: November 1994).
Page 22 GAO-03-566 U.N. Renovation

effectively manage scope and construction changes are important. These 

policies and procedures should provide a means for analyzing and 

documenting the reasons for changes and the implications of changes on 

cost, schedule, and quality. Third, timely and accurate progress reports on 

scope, cost, and schedule are important as a means of informing all 

relevant parties and coordinating changes. Regular reporting would 

identify key project issues that require discussion and impending issues 

that require resolution. While the United Nations recognizes the 

significance of developing a project management plan, it is important that 

the United Nations continues to incorporate best practices to ensure the 

plan’s effectiveness.

Project management staff are essential to controlling schedule and cost 

changes because they will guide decision making and coordinate resources 

throughout the project. Project management staff would represent the 

United Nations as the owner of the project and facilitate coordination and 

communication between the design firms and construction contractors. 

The United Nations does not currently have sufficient staff to manage the 

project effectively but, according to U.N. officials, plans to hire additional 

staff and/or contractors. The United Nations added seven staff to its Capital 

Master Plan team during the conceptual planning phase, including two 

security officials, and plans to augment its management capability during 

design. In February 2003, the United Nations appointed an Assistant 

Secretary-General as the full-time executive director of the Capital Master 

Plan management project. As of March 2003, the United Nations had 12 

people on the renovation project management staff. The United Nations is 

evaluating options for acquiring additional expertise and anticipates having 

a management team of 20 staff and contractors during the design phase and 

a team of about 40 staff at the peak of construction.

Office of Internal Oversight 

Services and the Board of 

Auditors Plan to Conduct 

Oversight of the Renovation 

Project 

In a February 2003 resolution, the General Assembly stressed the 

importance of oversight in implementing the Capital Master Plan and 

requested the Board of Auditors and all relevant oversight bodies, such as 

the Office of Internal Oversight Services, to initiate immediate oversight 

activities.20 In our last report, we noted that the Office of Internal 

20United Nations General Assembly, Resolution Adopted by the General Assembly, 

A/RES/57/292.
Page 23 GAO-03-566 U.N. Renovation

Oversight Services21 did not have the expertise to perform an oversight 

role, but the office had agreed to assume such responsibility by hiring 

people with the necessary skills. Since then, the office has assigned one 

staff member to begin researching the Capital Master Plan on a part-time 

basis. However, the office has not developed a plan detailing the oversight 

functions it plans to pursue or hired additional staff. Officials from the 

oversight office stated that it has requested funding so that it can hire 

contractors to help evaluate the Capital Master Plan, the project 

management plan, and the security upgrades. The officials anticipate that 

these contractors would have architectural and construction skills and 

knowledge of New York City building codes. 

The Board of Auditors had not yet conducted oversight of the Capital 

Master Plan but plans to complete an audit strategy by June 2003.22 The 

board has decided to review financial accounts, compliance with U.N. 

procurement regulations, and the effectiveness of Capital Master Plan 

management. After the board completes its audit strategy, it plans to 

determine the additional resources and expertise it needs to conduct 

oversight of the renovation. According to a board official, the United 

Nations approved initial funding of $35,000 in April 2003 to cover the audit 

of Capital Master Plan activities during 2003. However, the board will 

require additional resources for oversight as the renovation progresses.

Department of State Has 

Begun Monitoring 

Renovation Planning

The United States has a substantial interest in the renovation project and 

its costs, particularly since the Secretary-General anticipates U.S. 

financing. As the project goes forward, the United States will decide 

whether to finance the renovation and will take part in other key decisions. 

The Department of State, the lead foreign affairs agency responsible for 

developing and implementing U.S. policy toward the United Nations, has 

assembled a task force to monitor U.N. implementation of the Capital 

Master Plan. While Department of State officials have consulted with other 

U.S. government officials concerning the renovation project, they have not 

yet created a formal framework that defines the task force’s mission and 

program goals. In addition, a department official stated that they do not 

21The U.N. Office of Internal Oversight Services conducts internal oversight of U.N. activities 

through monitoring, inspection, and evaluation. The office reports to the Secretary-General.

22The U.N. Board of Auditors is an external audit agency that audits U.N. accounts, funds, 

and programs. The board reports to the General Assembly. 
Page 24 GAO-03-566 U.N. Renovation

have the expertise to undertake effective monitoring of the project as it 

progresses. 

In our June 2001 report, we recommended that the Department of State 

develop a comprehensive U.S. position on matters pertaining to the 

renovation. We further recommended that if the United States were to take 

a position in support of the renovation, the department should consider 

obtaining expertise in construction management and financing. In June 

2001, the department took a position in support of renovating the U.N. 

headquarters complex and created an interagency task force to monitor the 

renovation project in August 2002. The task force consists of six officials 

from the department and the Office of Management and Budget who work 

part-time on task force activities and a point-person at the U.S. Mission to 

the United Nations who monitors U.N. renovation planning efforts. In 

addition, a senior official at the Ambassador level represents U.S. concerns 

on the renovation project to the United Nations and other member state 

representatives. To assist the task force, the department has also retained a 

part-time consultant with building construction and security experience. 

Although the Department of State has organized the task force, it has yet to 

develop an interagency framework that sets forth the task force’s mission 

or program goals. To monitor the project and coordinate the U.S. decision 

on whether to finance the renovation, the department will undertake 

diplomatic, federal financing and budgeting, and construction activities 

that will require participation from numerous government officials and 

organizations with the necessary expertise. A framework that describes the 

task force’s mission, program goals, and coordinating mechanisms will help 

ensure that each organization has a clear understanding of its role, 

responsibilities, and expectations. The development of this framework is 

important because the task force’s monitoring role is likely to continue 

through the four remaining phases of the renovation project. 

Furthermore, with established mission and program goals, the department 

could specify resource needs, including appropriate skills needed to 

achieve a successful outcome of the project. As the renovation proceeds 

and the management of the project increases in magnitude and complexity, 

the department can identify and obtain the critical skills that will be needed 

to monitor the project. Department officials have stated that they lacked 

the needed expertise to monitor a renovation project of this magnitude. 

It is also important that the task force is staffed appropriately because the 

Department of State will have a number of key questions and issues to 
Page 25 GAO-03-566 U.N. Renovation

address over the life of the project, particularly if the United States agrees 

to finance the renovation. Some key questions and issues to be addressed 

include the following:

• If the United States offers to finance the renovation, how would it 

structure a loan to the United Nations? What should be the loan’s terms 

and conditions? Would the United States provide a loan that fully funds 

the renovation project? If there are cost increases during the renovation, 

would the United States provide additional financing and, if so, under 

what terms and conditions?

• Does the United Nations have internal controls in place to effectively 

manage changes in costs, scope, and schedule throughout the design 

and construction of the project?

• To what extent are U.N. officials coordinating the renovation design and 

construction with that of the proposed new visitors center?

• What types of incentives will the United Nations include in its contracts 

with design and construction firms to ensure that their work meets U.N. 

expectations? 

• Since the design phase provides the greatest opportunity to make 

decisions that could minimize future building maintenance and 

operating costs, to what extent are these future costs being considered 

during the design phase?

• How will U.N. officials ensure that value-engineering principles—a 

formal technique used by contractors or independent teams to identify 

methods of constructing projects more economically—are applied 

during the design and construction phases?

The department’s position on each of these issues and the level of 

monitoring it will undertake will drive its resource and expertise needs. 

Conclusions The United Nations has used a reasonable process thus far to develop its 

renovation plans, but it is still early in the project and changes in the 

schedule and cost estimates are to be expected. While the General 

Assembly has funded the project’s design, a commitment to finance the 

renovation will be needed by October 2003 for the United Nations to 

remain on its current schedule and sign a lease for the swing space. If the 
Page 26 GAO-03-566 U.N. Renovation

planned swing space is not available, the United Nations will have to 

reconsider its renovation approach, potentially leading to delays in the 

renovation process. The United States, however, has not yet taken a 

position on whether or how to finance the renovation. In addition, careful 

management and oversight of a project of this magnitude and complexity 

will be necessary to minimize schedule and scope changes. The 

renovation’s completion, final cost, and quality could be adversely affected 

if the United Nations does not provide adequate staff to manage the 

renovation and establish careful controls to limit scope changes. Continued 

monitoring by the Department of State will be critical as the project 

progresses and various issues arise, particularly if the United States 

finances the renovation. 

Recommendations for 

Executive Action

We recommend that the Secretary of State, in consultation with 

appropriate administration officials and other U.N. members, direct the 

U.S. representative to the United Nations to

• encourage the United Nations to complete and implement an effective 

project management plan that will guide decision making and 

coordination throughout the renovation project, and 

• encourage the United Nations to provide the Office of Internal Oversight 

and the Board of Auditors with the resources needed to conduct 

effective oversight of the Capital Master Plan as the project progresses. 

In addition, to ensure that U.S. interests are effectively represented as the 

United Nations proceeds through the design phase, we recommend that the 

Secretary of State define the mission and program goals of the task force 

currently monitoring U.S. participation in the Capital Master Plan. We 

further recommend that the Secretary determine the expertise the task 

force needs to fulfill its role and ensure that it has the resources necessary 

to monitor the project over its duration.

Agency Comments and 

Our Evaluation

In commenting on a draft of this report, the United Nations and 

Department of State agreed with our findings and recommendations. 

However, the Board of Auditors disagreed with our recommendation 

calling for resources for the board to conduct oversight. A board official 

stated in April 2003 that the United Nations approved $35,000 for the board 

to conduct oversight of the $1.2 billion renovation project. We modified our 
Page 27 GAO-03-566 U.N. Renovation

recommendation to acknowledge the board’s initial funding, but we 

continue to recommend funding for the board’s oversight function over the 

course of the 6-year renovation project. Ensuring that the board has the 

necessary resources to conduct oversight will be important throughout the 

renovation. The board also provided technical comments to our report, 

which we incorporated as appropriate. Written comments from the United 

Nations, Department of State, Office of Internal Oversight Services, and 

Board of Auditors, along with our response, are in appendixes V through 

VIII. We provided the Office of Management and Budget with a draft of our 

report, but the office did not provide any comments.

As agreed with your office, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 30 days from the 

report date. At that time, we will send copies of this report to the Secretary 

of State; the U.S. Ambassador to the United Nations; the Director, U.S. 

Office of Management and Budget; the U.N. Secretary-General; and 

interested congressional committees. We also will make copies available to 

others on request. In addition, the report will be available at no charge on 

the GAO Web site at http://www.gao.gov.

If you or your staff have any questions about this report, please contact me 

at (202) 512-8979. Additional GAO contacts and staff acknowledgments are 

listed in Appendix IX.

Sincerely yours,

Joseph A. Christoff, Director

International Affairs and Trade

Bernard L. Ungar, Director

Physical Infrastructure Issues
Page 28 GAO-03-566 U.N. Renovation

Appendix I

Scope and Methodology AAppenendxIdeisi

To assess the reasonableness of the process used by the Secretariat for 

project planning and development, including the cost estimate and security 

plans, we reviewed U.N. records, including reports developed by the 

architect-engineering firm and security assessments prepared for the 

United Nations. We also researched industry practices related to 

construction project planning and development, cost estimating, and 

security plan development. We compared the Secretariat’s efforts in project 

planning and cost estimating with industry practices as identified by the 

Federal Facilities Council and the Construction Industry Institute. We also 

reviewed the assumptions supporting the cost estimates, including 

contingencies and swing space costs. In assessing the process the 

Secretariat used to develop its security plan, we used industry-recognized 

guidelines as criteria. We also obtained input from U.S. federal agency 

security experts on the process used to develop the United Nations’ 

security plan. In addition, we reviewed other recently implemented or 

planned security initiatives and their interface with the security 

components of the Capital Master Plan. We discussed various aspects of 

the project, including the process by which the Capital Master Plan was 

developed, with U.N. renovation project staff and consultants.

To assess the potential financial impact to the federal government of the 

renovation, we modeled the financial impact of a no-interest, 1 percent, and 

2 percent loan to the United Nations. We did not assess the financial impact 

to the federal government of the renovation if the United Nations sought 

other financing options, or if the United Nations did not undertake the 

renovation and repaired or replaced major building systems as they failed. 

We reviewed the most current renovation cost estimates, the renovation 

cash flow statement, the U.N. Development Corporation cost estimate for 

swing space, interest rates for corporate and tax-exempt bonds, interest 

rate assumptions in the President’s budget for fiscal year 20041

 and the 

Economic Report of the President (1999), and the 1948 loan agreement 

between the United Nations and the United States. We used the Office of 

Management and Budget’s Credit Subsidy Calculator to estimate the 

interest and default subsidies for interest-subsidized loans under various 

terms. In doing so, we made several key assumptions including the interest 

rate, the U.S. disbursal of funds, and a repayment plan. We then discussed 

1

Office of Management and Budget, Analytical Perspectives, Budget of the United States 

Government, Fiscal Year 2004 (Washington, D.C.: U.S. Government Printing Office, March 6, 

2003).
Appendix I

Scope and Methodology

Page 29 GAO-03-566 U.N. Renovation

our assumptions with Department of State, Congressional Budget Office, 

and Office of Management Budget officials.

To analyze the critical milestones remaining in the renovation project, we 

reviewed the critical paths and the estimated schedules for the U.N. 

renovation and the U.N. Development Corporation’s proposed swing space 

building. We compared these critical paths and linked them to illustrate the 

necessary milestones and their sequence. We then clarified the sequence 

and duration of these milestones in interviews with Capital Master Plan 

staff at the United Nations, officials at the U.N. Development Corporation, 

and officials at the Department of State. In addition, we consulted with 

construction industry experts and legal counsel within GAO to evaluate 

and comment on the validity of the milestones’ sequence.

To assess U.N. and Department of State efforts to monitor and oversee the 

renovation, we reviewed U.N. documents such as the Capital Master Plan, 

the U.N. renovation project management plan, the U.N. resolution 

pertaining to oversight of the Capital Master Plan, and the mission 

statements of the Office of Internal Oversight Services and the Board of 

Auditors. We subsequently spoke with U.N. and Department of State 

officials to determine their past and anticipated oversight roles and 

responsibilities in the U.N. renovation. In addition, we discussed the 

personnel required to adequately oversee the renovation, the funding 

received and requested for renovation monitoring, and the procedures in 

place for decision making and oversight.

In conducting our review, we received the full cooperation of the United 

Nations, U.N. Development Corporation, U.S. Mission to the United 

Nations, and the Department of State. We conducted our review between 

June 2002 and April 2003, in accordance with generally accepted 

government auditing standards.
Page 30 GAO-03-566 U.N. Renovation

Appendix II

Two Approaches to Renovating the U.N. 

Headquarters Complex ApenIdxi

U.N. Secretary-General 

Offered Two 

Renovation 

Approaches

In the August 2002 Capital Master Plan, the U.N. Secretary-General 

presented two approaches to renovating the U.N. headquarters complex. 

According to the Capital Master Plan, the unique conference room needs of 

the United Nations were a driving factor in the Secretary-General’s 

development of these approaches. The two approaches include 

• temporarily relocating most U.N. activities during much of the 

construction work to swing space in a proposed new building near the 

U.N. complex (see fig. 6), or

• rotating U.N. staff through more limited swing space in a new four-story 

building constructed on the U.N. headquarters complex where the South 

Annex is currently located. 

The Secretary-General endorsed the first approach, and the General 

Assembly approved the development of renovation designs based on that 

approach.

Figure 6: U.N. Headquarters Complex and Proposed Location of Swing Space under 

Approach 1

Sources: United Nations and GAO.

North Lawn

Extension

Unitar

Building

Core complex

Subsequent buildings

Swing space

Conference

Building

Swing

space

General

Assembly

Secretariat

First Avenue

FDR Drive

East River

FDR Drive

North

South

AnnexLibrary

42nd Street

48th Street

SITE PLAN

UNITED NATIONS HEADQUARTERS

LONG TERM CAPITAL MASTER PLAN

Buildings and Grounds Included in Renovation
Appendix II

Two Approaches to Renovating the U.N. 

Headquarters Complex

Page 31 GAO-03-566 U.N. Renovation

Approach 1 Under the first approach, most U.N. staff and activities would temporarily 

relocate to swing space in a proposed new office building near the U.N. 

complex during much of the renovation. U.N. consultants estimated that 

the renovation would take less than 5 years to complete and cost about $1.2 

billion. As shown in table 2, the cost estimate includes a baseline scope—

removing asbestos; replacing the electrical, plumbing, and climate control 

systems; and installing an upgraded fire suppression system. The cost 

estimate also includes leasing swing space for 4 years from the U.N. 

Development Corporation, a New York State nonprofit public benefit 

corporation tasked with constructing and leasing office space to the United 

Nations. Additional cost factors include the replacement of the Secretariat 

Building’s window structure and additional scope options that the General 

Assembly has not yet decided to include in the renovation. These options 

include additional safety and security measures, emergency backup 

provisions, and sustainability measures to address environmental goals. 

The cost estimate excludes construction of an additional conference room 

on the complex1

 and security upgrades that the United Nations will 

complete before the renovation begins. 

Table 2: Preliminary Cost Estimate of Approach 1

Source: GAO analysis of U.N. data.

The U.N. Development Corporation has offered to construct the swing 

space building. The new office building would be built on a park next to the 

U.N. Headquarters complex and connected to the existing complex by a 

1

Under this approach, the United Nations would have the additional conference room within 

the swing space building.

Renovation component Estimated cost (in millions)

Baseline scope $991

Swing space leasing 96

Secretariat building window structure 36

Exclusion of conference room -57

Completed security upgrades -17

Subtotal $1,049

Scope options 144

Total $1,193
Appendix II

Two Approaches to Renovating the U.N. 

Headquarters Complex

Page 32 GAO-03-566 U.N. Renovation

tunnel. The United Nations currently plans to sign a long-term lease for the 

building with the U.N. Development Corporation. The building would be 

used as swing space during the 4 years of the renovation. Afterwards, the 

United Nations would relocate most of its New York City staff that 

currently work in office space outside the Headquarters complex to the 

swing space building. This would include relocating staff out of office 

space in two buildings currently leased from the U.N. Development 

Corporation. According to corporation officials, the corporation could then 

be able sell these two buildings and provide the proceeds to New York City.

Approach 2 Under the second approach, the United Nations would replace the South 

Annex, a two-story building on the U.N. Headquarters complex, with a fourstory building to use as swing space. The United Nations would lease 

additional office space as needed for swing space. The renovation work 

would occur in stages with five to ten floors of the U.N. Headquarters 

renovated while staff rotate through the swing space. To avoid excessive 

disruption, the meeting rooms would be renovated at night and on 

weekends. Under this approach, the renovation would take 6 years and 

cost more than $1.3 billion (see table 3).

Table 3: Preliminary Cost Estimate of Approach 2

Source: GAO analysis of U.N. data. 

The total cost estimate is higher under Approach 2 because the renovation 

work would occur in stages since the limited swing space could not house 

all U.N. headquarters staff. Also, the United Nations would construct an 

additional conference room on the Headquarters complex. Under this 

approach, the swing space cost—replacing the South Annex and additional 

commercial leasing—would be less than leasing a swing space building 

from the U.N. Development Corporation. As with Approach 1, this cost 

Renovation component Estimated cost (in millions)

Baseline scope $1,094

Swing space construction and leasing 66

Secretariat building window structure 36

Completed security upgrades -17

Subtotal $1,179

Scope options 144

Total $1,323
Appendix II

Two Approaches to Renovating the U.N. 

Headquarters Complex

Page 33 GAO-03-566 U.N. Renovation

estimate includes replacement of the Secretariat Building’s window 

structure and various scope options that the General Assembly has not yet 

decided to include. This cost estimate also excludes the security upgrades 

that the United Nations will complete before renovation begins. Although 

Approach 2 would cause the least disruption because meeting chambers 

would be renovated when the rooms were not in use, the risk of cost 

overruns, delays, and disturbance, and the perceived risk of exposure to 

asbestos is higher.
Page 34 GAO-03-566 U.N. Renovation

Appendix III

U.N. Consultants and Subconsultants ApenIdxi

Table 4 presents the firms that were involved in the conceptual planning 

process and noted in this report as consultants to the United Nations or 

subconsultants to the U.N. architect-engineering firm.

Table 4: Firms Involved in the Conceptual Planning Process

Source: United Nations.

a

This consultant was the architect-engineering firm involved in developing the 2000 Capital Master 

Plan.

Type of consultant/subconsultant Name of firm

Architect-engineering firm Renato Sarno Group

Consulting engineer Ove Arup & Partners/Hanscomba

Cost estimating subconsultant Turner Construction

Cost estimating consultant Hill International

Security subconsultant Ducibella Venter & Santore

Project management consultant Atkins, Hanscomb, Faithful, and Gould
Page 35 GAO-03-566 U.N. Renovation

Appendix IV

Security Upgrades at the United Nations ApenVIdxi

Completed and Planned 

Security Initiatives

In response to the terrorist attacks of September 11, 2001, the United 

Nations implemented emergency security measures and also accelerated 

its plans to implement some of the security measures that had been 

originally planned for the renovation. The United Nations also worked with 

its consultants to enhance the security component of the revised Capital 

Master Plan. According to U.N. officials, to more effectively coordinate the 

interface between the upgrades made after September 11, 2001, and the 

security measures in the Capital Master Plan, the United Nations has hired 

the same consultant to work on both packages, assigned some internal 

staff to oversee both projects, and calculated the cost of any overlap in 

security upgrade initiatives.

As shown in figure 7, the recent and planned security measures for the U.N. 

Headquarters complex comprise four initiatives. 

Figure 7: United Nations Security Initiatives

Emergency Upgrades This emergency initiative was introduced in December 2001 in response to 

the September 11, 2001 terrorist attacks. In late 2001, the United Nations 

organized a Senior Emergency Management Group to deal with major 

emergency situations at the U.N. Headquarters. The Secretary-General 

identified the most immediate, short-term security needs and requested 

Post 9/11 upgrades Capital Master Plan upgrades

$17 million accelerated

Emergency

upgrades

$3.7 million

"Strengthening

security"

$26 million

Capital Master Plan 

baseline scope

$77 million

Capital Master Plan 

options

$30 million

Largely implemented 

in 2001:

• Perimeter security 

upgrades

• Evacuation route 

upgrades

To be completed 

by 2004:

• Access control 

upgrades

• Renovate security 

control room

Highest priority 

security upgrades:

• Additional access 

control

• Blast-resistance

Not highest priority 

or upgrades to be 

coordinated with 

N.Y. City:

• Strengthening 

building structure

• Barriers on First 

Avenue

Sources: GAO analysis of Capital Master Plan and related U.N. documents.
Appendix IV

Security Upgrades at the United Nations

Page 36 GAO-03-566 U.N. Renovation

additional funding. These measures, estimated to cost $3.7 million, 

included enhancements to the perimeter security and upgrades to the 

emergency response system on the complex and were largely implemented 

by March 2002.

Strengthening Security The strengthening security initiative also came as a result of the 

assessments the United Nations conducted after September 11, 2001. This 

initiative includes more long-term upgrades relative to the urgent measures 

implemented under the previous initiative. Some of the upgrades in this 

initiative (worth approximately $17 million) were part of the Capital Master 

Plan and their implementation was accelerated because of heightened 

security concerns. This initiative includes an upgraded access control 

system for the entire complex and renovations to the existing security 

control room. As of April 2003, the United Nations is designing these 

upgrades; U.N. officials expect them to be in place in 2004 at a total cost of 

$26 million.

Security Upgrades in the 

Capital Master Plan Baseline 

Scope 

The U.N. security design consultant made 114 recommendations for the 

2002 Capital Master Plan. The U.N. security staff, along with the consultant, 

prioritized those recommendations, creating a list of “highest priority” 

upgrades. These upgrades, totaling $77 million, were included as part of the 

baseline scope for the 2002 Capital Master Plan. The upgrades encompass 

additional visitor access control and blast resistance materials in certain 

areas on the complex.

Capital Master Plan Security 

Scope Option

This initiative includes the U.N. security consultant’s remaining 

recommendations that were either (1) not the highest priority or (2) 

required coordination with New York City. Totaling $30 million, these 

upgrades include strengthening the building structure and installing vehicle 

barriers on some roads adjacent to the complex.
Page 37 GAO-03-566 U.N. Renovation

Appendix V

Comments from the United Nations ApenVdxi
Page 38 GAO-03-566 U.N. Renovation

Appendix VI

Comments from the Department of State ApenVdxiI
Appendix VI

Comments from the Department of State

Page 39 GAO-03-566 U.N. Renovation
Page 40 GAO-03-566 U.N. Renovation

Appendix VII

Comments from the Office of Internal Oversight 

Services ApenVdxiI
Appendix VII

Comments from the Office of Internal 

Oversight Services

Page 41 GAO-03-566 U.N. Renovation
Page 42 GAO-03-566 U.N. Renovation

Appendix VIII

Comments from the U.N. Board of Auditors ApenVdxiI

Note: GAO comments 

supplementing those in 

the report text appear 

at the end of this 

appendix.

See comment 1.

See comment 2.

See comment 3.

See comment 4.
Appendix VIII

Comments from the U.N. Board of Auditors

Page 43 GAO-03-566 U.N. Renovation

See comment 5.

See comment 6.

See comment 7.

See comment 8.
Appendix VIII

Comments from the U.N. Board of Auditors

Page 44 GAO-03-566 U.N. Renovation

The following are GAO’s comments on the letter from the U. N. Board of 

Auditors dated May 9, 2003.

GAO Comments 1. The board stated that the United Nations had approved funds for the 

audit of the Capital Master Plan. A board official stated that 

approximately $35,000 was approved in April 2003 to conduct oversight 

of the renovation. We have included this information in the report. We 

modified our recommendation to acknowledge the board’s initial 

funding, but continue to recommend funding for the board’s oversight 

function over the course of the six-year renovation project.

2. We modified the report to reflect the board’s comment. 

3. We modified the report to reflect the board’s comment. 

4. See comment 1.

5. We modified the report to reflect the board’s comment.

6. We modified the report to reflect the board’s comment. 

7. No change made. The comment does not provide additional clarity to 

the report.

8. See comment 1. Since the renovation is likely to continue for a number 

of years, ensuring that the board has the necessary resources to 

conduct oversight throughout the project will be critical. Accordingly, 

we have modified our recommendation to clarify our position.
Page 45 GAO-03-566 U.N. Renovation

Appendix IX

GAO Contacts and Staff Acknowledgments ApenXIdxi

GAO Contacts Phyllis Anderson (202) 512-7364

Terrell Dorn (202) 512-6923

Staff Acknowledgments In addition to the individuals named above, Bruce Kutnick, Ronald King, 

Valérie L. Nowak, Maria Edelstein, Jeffrey T. Larson, Julia A. Roberts, Lynn 

Cothern, Jonathan Rose, and Barbara Shields made significant 

contributions to this report.

(320133)
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